COVER STORY: Finding fortune

Mar 1, 2014

Latin America’s capital markets are facing a sell-off in emerging markets as indiscriminate as the bull phase it succeeded. But as returns dwindle, asset buyers will have to become more discerning.
By Dominic O’Neill

To many, a brutal new year’s sell-off in emerging
market assets seemed to entrench a view that the biggest risk
to financial stability now sits in the emerging world
— including Latin America.

Average yields in JPMorgan’s benchmark index of
emerging market local currency government bonds reached 7.2% at
the end of January, up from 5.2% in April last year, and
compared to yields on 10-year US Treasuries still less than 3%.
Within the region, Argentina was forced to a 23% devaluation of
the peso in January, its biggest since 2002.

By the end of February, average yields in the emerging
markets bond index had returned to below 7%. Currencies
rallied: the South African rand and the Turkish lira, as well
as the Brazilian real, one of the currencies that has been most
vulnerable. But to some, the rebound remained a dubious
one.